Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB2263 Project Name Ust-Kamenogorsk Environmental Remediation (Industrial Waste Treatment) Project Region EUROPE AND CENTRAL ASIA Sector Solid waste management (50%); General water, sanitation and flood protection sector (50%) Project ID P078342 Borrower(s) GOVERNMENT OF KAZAKHSTAN Implementing Agency Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 20, 2006 Date of Appraisal Authorization April 24, 2006 Date of Board Approval December 5, 2006 1. Country and Sector Background During the Soviet era, Kazakhstan was under extensive heavy industrial development, which focused on maximizing output with little regard for the associated environmental degradation. Environmental policies were weak and little effort was made to regulate industries and ensure that they would not pollute the environment with hazardous substances. With regard to hazardous waste storage, this is highly inadequate due to the absence of appropriate landfills as well as incentives to reduce waste generation. In some oblasts, current inappropriately stored hazardous waste at factory sites are causing contamination of ground and surface waters that may lead to significant health hazards 1 . Currently Kazakhstan has a rapidly growing economy which until now has mainly been based on revenues from the oil & gas industry and the exploitation of its various other natural resources rich in iron, copper, zinc, uranium and other non-ferro metal ores. In the years following independence, Kazakhstan has recognized the importance of sustainable development and appropriate pollution control and made increasing efforts to address its multitude of environmental problems. Investments into industrial pollution control have been made in recent years, in particular to remediate contamination caused by historic polluting sources. The historic pollution is mostly the Government of Kazakhstan’s responsibility, which is also reflected in the Law on the Natural Resources of Kazakhstan. The law classifies the cleanup responsibility for the hazardous waste dumps as follows: for those dumps accumulated and located on the territory of a plant before May 30, 1992, cleanup will be the Government’s responsibility ; those after this date are the responsibility of the plant itself. The Bank supported Nura River Clean-up Project with $60 million of investments in remediation of historic mercury contamination of industrial sites and waterways is an example of the 1 World Bank, “Minimizing Environmental Impacts of Industrial Growth: Case study of petrochemical industry in Kazakhstan”, 2006 Page 2 Government’s will to deal with legacy environmental issues. The number and size of urgent environmental matters both from ongoing pollution and legacy issues and the many competing priorities related to the growth of the economy, however, make it difficult for the Government to deal with all the pressing issues in a reasonable time span and at the same time strengthen environmental legislation, regulatory systems and their capacities to adequately protect public health and the environment. Sector Issues One area of Kazakhstan that faces some of the most severe environmental pollution is Ust- Kamenogorsk, a city of approximately 300,000 inhabitants at the confluence of the Ulba and the Irtysh rivers in the northeastern part of the country. Ust-Kamenogorsk is the regional center of the East Kazakhstan Oblast, and one of the biggest industrial centers of the Republic of Kazakhstan. The city’s location in the immediate proximity to various deposits of natural resources, large rivers and to inexpensive hydro-power facilities contributed to its fast growth and development. The city is well known for large enterprises of nonferrous metallurgy, nuclear power, gold and rare metal plants, heat power plants, mechanical engineering and instrument- manufacturing, construction, agriculture production and many others. Major marketable products from local industries include lead, copper, zinc, gold, silver, tantalum, niobium, cadmium, antimony, selenium, indium, tellurium, uranium fuel pellets, titanium, beryllium, thallium, magnesium, sulfuric acid, mining equipment, paints, etc. The extensive industrial infrastructure of Ust-Kamenogorsk and its operations for over fifty years under careless environmental regulations have led to widespread pollution with hazardous components, including heavy metals and organic compounds, which have impacted the air, surface and ground waters, soils and biota of the city, and its surrounding areas. A significant part of the pollution in Ust-Kamengorsk originates from dump sites created before 1990 with large quantities of hazardous waste generated by the metallurgical, machine-building and energy industries and without adequate containment standards. By the year 2000, more than 28 million tons of solid and liquid waste was being stored in several sites along the outskirts of Ust-Kamenogorsk’s residential areas. The high concentration of industries in mining enterprises and metallurgic plants in and around Ust-Kamenogorsk, combined with inadequate pollution controls, industrial wastewater discharges and improper storage of (hazardous) waste, has resulted in the contamination of air, surface waters, groundwater and soil. Of particular concern are the hazardous materials 2 that have contaminated groundwater and rivers in the Irtysh River Basin posing a serious threat to the people who work and live in the area and downstream of Ust- Kamenogorsk along the Irtysh river. Figure 1 illustrates the atypical concentration of industries that operate in the city, and shows the relative location of major industrial dumps and potential sources of contamination. 2 Hazardous materials are residues from production processes and include heavy metals and radioactive components such as lead, copper, zinc, cadmium, magnesium, titanium, tellurium, uranium. Other pollutants such as sulfates, nitrates and hydrocarbons are also monitored in surface water and groundwater in the vicinity of the industrial sites. Page 3 2. Objectives The project has two development objectives: (i) provide secure containment for the toxic waste plume that is contaminating the groundwater of Ust-Kamenogorsk and therefore prevent the plume’s discharge into the Irtysh river and the city’s drinking water supply; and (ii) broadly address all water quality issues around Ust-Kamenogorsk by building strong institutional mechanisms for water quality monitoring and control of ongoing pollution by local municipal and industrial water users. The project is expected to benefit the present and future population of Ust-Kamenogorsk and residents of downstream communities by improving the quality of the local environment and averting a significant risk of toxic wastes entering the Irtysh River. 3. Rationale for Bank Involvement The World Bank is a leading donor in implementing complex environmental remediation projects and is well-placed to build upon its knowledge of water sanitation and supply, and environmental remediation approaches needed in the proposed Project. The Bank’s participation in the sector and in the proposed project will provide the government with low-cost financial support for a relatively costly program which is unlikely to yield immediate financial benefits. To date the Bank’s support to Kazakhstan’s environment, and water and sanitation sectors includes the: (i) Nura River Clean-Up Project – under implementation ($40.4 million loan); (ii) Syr Darya Control & Northern Aral Sea Phase I Project – under implementation ($64.5 million); (iii) Atyrau Pilot Water Supply & Sanitation Project - closed in September 2004 ($16.5 million). The proposed Ust-Kamenogorsk Environment Remediation Project is consistent with the goals of the 2004 Country Partnership Strategy (CPS), the previous Country Assistance Strategy (CAS) prepared in 2001, the 1999 National Environmental Action Plan (NEAP), the national environmental policy and with current regional local government and industry remediation efforts. Furthermore, the Project intends to help the Government of Kazakhstan in achieving sustainable environmental development that complies with budget investment priorities including the ‘Concept of water sector development of economy and water management policy of the Republic of Kazakhstan until 2010’ approved in a decree of the Government of the Republic of Kazakhstan. One of the four pillars of the CPS is ensuring sustainable growth while safeguarding the environment. The 2001 CAS identified environmental initiatives to reduce the damage to the quality of life for current and future generations as one of its four main components and proposed a focus on: (i) cleaning up contaminated rivers and water sources, (ii) restoring marginal lands, and (iii) improving management practices for water and wastewater. Reducing pollution and eliminating related pressures and impacts to the natural and human environment is one of the key pillars of the national environmental policy. Priorities identified in the NEAP addressed by the Project include: (i) the reduction of heavy metal contamination around one of the major industrial plants; (ii) protection of drinking water; and (iii) support of improved environmental management in industrial enterprises. The proposed project is also expected to build on and enhance the growing environmental awareness among industrial Page 4 companies, as well as cooperation between industries and government in the implementation of environmental remediation measures. Given the Bank's work with other partners at the international level in addressing environmental issues, the Bank can assist Kazakhstan in leveraging additional resources from other international and bilateral agencies. The particular environmental situation at Ust-Kamenogorsk offers the opportunity to seek GEF funding for two separate focal areas, namely International Waters and Persistent Organic Pollutants (POPs). GEF resources would allow government agencies in Ust-Kamenogorsk to enforce the capacity needed to put in place concrete reduction pollution initiatives with measurable impacts on the levels of contamination of the Irtysh River and its surroundings. In addition to its financial role, the technical assistance provided by the Bank will allow the Government to draw on state-of-the-art technical expertise, and extensive international experience in dealing with the physical, social and institutional aspects of the remediation program. Technical assistance provided under World Bank supported investment operations has been important in similar environmental clean-up projects such as the ongoing Kazakhstan Nura River Clean-up Project whose objective is to improve the welfare of the population in the Nura River Basin by cleaning up mercury pollution in the river, and providing a safe, secure and cost- effective alternative source of water to meet the growing needs of local water users. 4. Description The UK-ERP will address the environmental pollution linked to industrial hazardous waste accumulated before 1990. Through three main components described below, the project intends to stop further migration of historical industrial pollution to the residential area and eventually the Irtysh River. The project will optimize the design and implementation of a program for ground water clean-up and rehabilitation of waste disposal sites in Ust-Kamenogorsk based on technical, economic, financial, social and ecological assessments. In addition, the project will cover investments and/or activities to control groundwater downstream of treatment sites and the development of a long-term water-quality monitoring system for the Irtysh Basin. The Project would include the following three components and related activities: Component A. Containment of high-priority sources of groundwater contamination (US$21.8 million) Objective . This component will develop immediate cleanup activities to prevent further infiltration into the aquifer of contamination from the identified high-risk waste dumps and slurry ponds located within or near the city mostly in the area of the Central Industrial Complex including the industries of KazZinc, UMP, and UKHPP 3 . The project will focus on neutralizing point sources of pollution that are posing major risks to the groundwater system and therefore to the quality of the underground in residential areas and important drinking water wells. 3 Please see Annex 16 for a brief description of these industrial plants’ activities Page 5 Component B. Remediation of Current Contaminated Groundwater Sites (US$18.60 [RMF2] million) Component B includes three sub-components: (i) pump and treat groundwater remediation system; (ii) groundwater monitoring network, and (iii) Vodokanal technical capacity enhancement towards the repair of drinking water supply network leakages in the project area. Objective : This component will develop a technological approach to meet adequate measures for intercepting, treating and monitoring the contaminated groundwater in the project area. Furthermore, this component will provide resources for enhancing the capacity of Ust- Kamenogorsk Vodokanal to manage the rehabilitation of the city’s water supply system that leaks continuously, thereby possibly to interfere in the effectiveness of the cleanup groundwater remediation system (e.g., pump-and treat) proposed under the project. Component C. Project Management and Monitoring (US$1.0 million). This component will cover a number of activities related to project management and monitoring. The component will provide support to the Project Management Unit (PMU) for: (i) project management and technical assistance in such areas as construction supervision, procurement and financial management; and (ii) monitoring and evaluation of project impacts, including implementation of environmental management plan for construction activities under the project. 5. Financing Source: ($m.) BORROWER/RECIPIENT 7.20 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 34.60 GLOBAL ENVIRONMENT FACILITY 8.10 Total 49.90 6. Implementation The Ust-Kamenogorsk Environmental Remediation Project (UK-ERP) is expected to be implemented over a period of five and a half years, from mid 2007 until the end of 2012. The Loan Closing Date would be March 30 th 2013. The Committee of Water Resources of the Ministry of Agriculture (CWR) will be the project implementation agency of the UK-ERP and would have overall responsibility for project implementation. The CWR is a national agency that carries out water resources planning and management on a basin basis and regulates the interests of all branches, including ecological and water supply infrastructure requirements. The government has assigned project management responsibility to an existing and highly qualified Project Management Unit (PMU) under the Committee for Water Resources. The PMU has the necessary experience, professional skills and knowledge to coordinate the day-to-day implementation activities of World Bank funded projects accumulated also during the ongoing implementation of the Nura River Cleanup Project. The Chairman of the CWR would be responsible for coordinating project implementation with Page 6 the concerned Ministries, the local authorities of the City of Ust-Kamenogorsk and the Oblast of East-Kazakhstan, the local environmental institutions and the involved industries. Local and international consultants and experts will be hired to help with implementation. Institutions and stakeholders, in particular the local authorities of the City of Ust-Kamenogorsk and the Oblast of East-Kazakhstan and the industries affiliated with the historic waste dumps to be remediated, will play an important role in enabling successful implementation by participating in project design and implementation and coordinating participating activities such as the preparation of the EIA under the detailed design component. 7. Sustainability All the parties involved, the Committee of Water Resources of the Ministry of Agriculture, the Ministry of Ecology, the local authorities and the concerned industries have confirmed their strong support for the project. The project fits into the Integrated ‘Ecological Program for Public Health and Environmental Remediation of the City of Ust-Kamenogorsk for 2006-2015’, that was prepared by the regional Akimat upon the special request of the President of the Republic of Kazakhstan. Its long-term objective is to ensure the sustainable development of the city through support to pollution prevention initiatives for industry, environmental monitoring programs, plans for re-zoning of the city aimed at differentiating residential and industrial areas, development of ecological areas, and promotion of tourism. Public hearings conducted during the EIA and consultations with focus groups as part of the Social Assessment have confirmed the strong support of the population to improve the environmental situation of the city and hence the implementation of the project as part of this objective. The industries with waste dumps on their premises for remediation under the project and that will host the facilities of the pump-and-treat system have signed protocols to endorse their support of the project. They have committed to provide information and access to the PMU, consultants and contractors for project implementation. Equally critical to the sustainability of the Project is ensuring long-term financial planning to allow operation of the pump-and-treat system for the anticipated timeframe of 15 years. The operating costs of this facility are substantial and could reach a maximum of US$2.0 million per year. The CWR will be responsible for management, maintenance and operations for 15 years. Funding of the operating costs of the groundwater treatment will be guaranteed by the Government of Kazakhstan. Funding and management arrangements that anticipate and set conditions for continuation of the pump-and-treat operations for the full operational period of 15 years will be detailed in the Loan Agreement. 8. Lessons Learned from Past Operations in the Country/Sector The groundwater treatment component of the project is unique for Kazakhstan and will draw upon experience from Bank staff and international experts and specialists in Kazakhstan familiar with environmental clean-up projects, such as the Nura River Clean-up Project. Bank experience Page 7 has shown that: i) the need to coordinate among key government agencies and the concerned industries can present challenges that should be taken into account in the design of project implementation arrangements; ii) local institutions need to be fully involved from the earliest stages of the project; and iii) competent and efficient national management staff are invaluable in ensuring the viability and sustainability of the project and should be brought on at an early stage. The extensive involvement of local institutions and stakeholders particularly in consultations on the design of project components and in monitoring of (environmental) performance has also been a critical factor in the success of other environmental remediation projects supported by the Bank (e.g. the Bulgaria Environmental Remediation Pilot Project). International experience in environmental remediation projects confirms the importance of a risk management approach. The objective to reduce risks of contamination to the environment, public health and the economy and keep risks at an acceptable level, should prevail over policies that are merely based on fixed remediation standards. Another practical experience is the need for a comprehensive design stage at the start of project implementation based on extensive environmental monitoring particularly in situations such as in Ust-Kamenogorsk were distribution of contaminants do not occur as a stationary pattern but are still subject to dynamic processes 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP / GP 4.01) [x] [ ] Natural Habitats ( OP / BP 4.04) [ ] [x] Pest Management ( OP 4.09 ) [ ] [x] Cultural Property ( OPN 11.03 , being revised as OP 4.11) [ ] [x] Involuntary Resettlement ( OP / BP 4.12) [] [x] Indigenous Peoples ( OD 4.20 , being revised as OP 4.10) [ ] [x] Forests ( OP / BP 4.36) [ ] [x] Safety of Dams ( OP / BP 4.37) [] [x ] Projects in Disputed Areas ( OP / BP / GP 7.60) * [ ] [x] Projects on International Waterways ( OP / BP / GP 7.50) [x] [ ] The proposed Project will trigger the Environmental Assessment (OP/BP 4.01). Therefore an Environmental Impact Assessment has been prepared. The draft final EIA was presented at a stakeholder workshop on May 11, 2005. Following disclosure in the country, the final EA report was disclosed to the Infoshop in Washington, DC on March 1, 2006. The safeguard policy on Projects on International Waterways initially triggered at the project concept stage is no longer applicable. In accordance with World Bank Operational Policy 7.50, for all environmental projects that involve the use of, or the potential pollution of, international waterways such as rivers, canals, lakes or similar bodies that form boundaries with or flow * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 8 through two or more countries, evidence should be provided that: 1) the host country has notified the affected country (or countries) of the proposed project; and 2) that the project meets relevant agreements or arrangements between the countries relating to the use and protection of the international waterway. The proposed project investments have a positive impact on the quality of the waters of the Irtysh River 4 by stopping the contaminated groundwater plume to advance towards the river and contaminate the drinking water wells located in the vicinity of the river. The project design and implementation involves the treatment of historically polluted groundwater and the re-injection in the underground of the treated groundwater without any discharges to or extraction from the Irtysh river. However, since: (i) the aquifer under the project is a local aquifer and does not extend into any other country, and (ii) the project will not carry any works on the Irtysh River, OP 7.50 is not triggered. Therefore, it is not necessary to notify the riparian countries of the proposed project intentions through a letter signed by the Government of Kazakhstan or to seek exemption from notification. 10. List of Factual Technical Documents 11. Contact point Frank Van Woerden Senior Environmental Engineer and TTL The World Bank 1818 H Street, NW Washington, D.C. 20433 (202) 473-3703 Email: Fvanwoerden@worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop 4 The Irtysh River has its source in the Mongolian-Altai Mountains in Kinjiang, China and then flows NW through Kazakhstan (cities of Ust-Kamenogorsk, Semipalatinsk and Pavlodar) until it meets the Ob River in western Siberia, Russia (passing through cities of Omsk, Tara, Tobolsk, and Khanty-Mansiysk). Page 9